Monday, October 9, 2017

Our first rental income property

When we initially started, we believed so much that if we reach our goal of 50 doors, our life would be awesome, that we had no fear. We just decided to follow the instructions and templates of our RichDad coaches and do whatever it takes to start getting assets (i.e. whatever puts money in our pocket).

The way we looked for properties was very simple: we were looking for properties that were being rented already and had positive cash flow of no less than $200 per month per door. Based on the lecture notes, we were supposed to research 100 properties, then make 10 offers, negotiate 3 of them and buy the one with the best numbers and projections.

It turned out that in 2014 market, buying properties wasn't hard at all. There was lots for sale. We did look at a bunch and populated a large Excel template with data. We drove by about 20. We tried to make some offers in Oshawa and lost them.

Couple of days later, there was a knock on our door... A real estate agent looking for clients and asking if we were planning to sell our house. I said no and asked him to help us find an income rental property instead.

Within a few more days, we made an offer on a triplex in Guelph with an agent who specialized in Toronto/Oshawa but was super eager to help us get what we were looking for. Looking back, there is no doubt - We were super lucky! We now know that we had minimal understanding of potential issues and associated costs, did insufficient very high level due diligence and zero market research.

Nonetheless, stars somehow aligned.  The house happened to be in a good area and location. We had great tenants from the start. The seller provided accurate numbers on the MLS listing and did a good job maintaining the house. So we did end up with a positive cash flow.

The only hiccup was that the 'triplex' is actually a legal non-conforming triplex and its official zoning is a Single Family Residential home. There was a bit of a back and forth at closing since NBC didn't want to provide a loan for a property zoned as Single family home but advertised as a triplex. Ever since that issue, we do check the actual zoning :)

Here is the century home we got. We are very proud of it since it is one of Guelph's beautiful heritage buildings and will be turning 125 soon.


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